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The Copyright Directive proposal from a Dutch perspective

Article 15 (contract adjustment mechanism and fair remuneration) and Article 16 (dispute resolution mechanism) of the Directive are already in place under Article 26(d) and Article 25(g) of the Dutch Copyright Act (DCA) aimed at strengthening the position of authors and performers in their contractual relationships with exploiters. How have these Articles been operating in practice so far and what can authors, performers, musicians and publishing companies learn from the Dutch implementation?

The Dutch Copyright Contract Act

The DCCA came into force on 1 July 2015, with the goal of strengthening the position of the author and performer in their contractual negotiations and final agreements regarding the exploitation of their works of art. It is also aimed at strengthening the financial position of rights holders in such a way that they receive a fairer remuneration out of the total profits generated by the exploitation of their works than before.

To reach those goals, the DCA now contains a chapter called “The exploitation agreement” (the chapter contains mandatory law) in which several rights are granted to authors and performers such as the basic right to fair remuneration, a 'bestseller clause' which provides for additional fair remuneration and a right to dissolve an exploitation agreement if the work is not sufficiently exploited within a reasonable period of time. In addition, the DCA now contains a clause on the appointment of a dispute resolution committee and an important clause (25(h) DCA) on applicable law which stipulates that the DCA applies to the agreement regardless the choice of law if the contract would be governed by Dutch law in the event of a (hypothetical) lack of choice of law or if the work is exploited for the most part or solely in the Netherlands. This means that, for example, publishing companies or record labels should always take the DCCA into account when dealing with Dutch authors or performers or with Dutch legal entities that are copyright owners. Especially, since Article 25(h) DCA also stipulates that the author cannot waive its rights under the chapter “The exploitation agreement”.

The Directive in the Netherlands

Chapter 3 of the proposed Directive with the title “Fair remuneration in contracts of authors and performers” has more or less the same goals as the DCCA and its Articles 15 and 16 are similar to the DCCA implementation in the Netherlands. Article 14 of the Directive, which deals with transparency obligations, has no parallel in Dutch law and will probably contribute to better ways for authors to actually check what the revenues from the exploitation of their works are.

Article 15: contract adjustment mechanism - 'bestseller clause'

The contract adjustment mechanism, as prescribed by Article 15 of the Directive already exists in the Netherlands under Article 25(d) DCA, and is often referred to as the 'bestseller clause'. It gives the maker of a work the right to claim for additional fair remuneration if the agreed remuneration in light of the mutual performance of the exploitation agreement is seriously disproportionate to the revenues from the exploitation of the work.

This bestseller clause gives the author a potentially powerful tool with which to claim additional compensation from the exploiter of the work if, for example, it becomes a bestseller and the agreed remuneration (not anticipating such a success) appears to be disproportionally low with hindsight. The question in practice is, of course, when the agreed remuneration is “seriously disproportionate” to the revenues from a work. It is, however, expected that relying on the bestseller clause in case of fixed remuneration is more likely to be successful than where royalties are paid which, of course, enable the author to profit from the success of the work proportionally.

Businesses exploiting works should bear in mind that when contracting with Dutch authors, a claim for fair remuneration on top of the already existing right to fair remuneration may come into play in the event the exploitation of a work turns out to be a huge success.

Under the second part of Article 25(d) DCA, the bestseller clause can even be invoked by the author against a third party that has acquired the copyrights from the former contracting party of the author. This means that acquiring copyright that originates from a Dutch author can pose risks to the acquiring company, such as the original author claiming for the additional fair remuneration under the bestseller clause. When negotiating the transfer of such copyrights the acquiring company should, therefore, take into account the contents of the original agreement between the author and the transferor to establish what the possible risks under the bestseller clause actually are.

How the bestseller clause will operate in practice remains unclear. There has been no case law to date and few authors are likely to be keen on starting legal proceedings against their contracting party which will often have the deepest pockets to fight such a dispute in court. Furthermore, there is no transparency obligation under Dutch law yet with regard to generated revenues from the exploitation of works which means the original rights holder is obliged to rely on information received from the contracting party. Finally, critics have suggested that the bestseller clause may actually reduce the bargaining power of original rights holders with respect to initial agreed compensation as those exploiting the works can argue authors are protected by the bestseller clause.

Article 16: dispute resolution mechanism

The implications of the DCCA might become clearer in the coming months since the "Geschillencommissie Auteurscontractenrecht" (copyright contract act dispute resolution committee) began operating on 1 October 2016. The setting up of this committee is the direct result of the implementation of Article 25(g) DCA, that provides for the creation of a dispute resolution committee competent to rule on matters of i) fair remuneration, ii) additional fair remuneration (bestseller clause), iii) non-use of a work and iv) unfair contract terms.

The goal of the dispute resolution committee is to offer an accessible option for parties to resolve their dispute on one of the above-mentioned points without having to go to court. The committee is aimed at maintaining a sustainable relationship between the author and the exploiter and, therefore, strives to reach an amicable settlement between the parties, for example by using an expert mediator. The only fees involved are a complaint fee of EUR 150, and, for the exploiter, registration fees of EUR 150; legal representation is not required. If no settlement can be reached, the defendant will have one month to file a reply to the complaint filed by the claimant. The committee then can decide to appoint an expert to give an opinion and/or to plan a hearing. The rules of procedure of the Geschillencommissie Auteurscontractenrecht state that, in principal, deadlines are fixed and extensions are not possible. The committee will give its decision around one month after the hearing. The decision cannot be appealed and parties are deemed to have agreed upon the contents of the decision as if it were an agreement, unless one of the parties starts legal court proceedings within three months of the committee’s decision.

Finally, under certain circumstances, authors even have the possibility of filing an anonymous claim with the dispute resolution committee that can lead to a non-binding decision of the committee which can be appealed within two months.

Other related and relatively new aspects under Dutch copyright law

In addition to the above, the DCCA also resulted in several other new articles in the DCA including:

Article 2 DCA now stipulates that for granting exclusive copyright licenses a written deed is required as of 1 July 2015 (as was already the case for the transfer of copyright).

Article 25(e) DCA regarding the non-use of a work of art. In short, this gives the author the right to reclaim copyright or dissolve the exploitation agreement under certain circumstances, for example, if the contracting party fails to exploit the work sufficiently within a reasonable period of time. The rationale behind this article is that authors should be able to look for other opportunities to exploit their works if the original exploiters fail to do so effectively and provided that this is not due to the acts of the relevant author or where the exploiter has such a substantial interest in maintaining the agreement with the author that this reasonably overrides the author’s interests in dissolving the agreement.

Article 25(f) DCA stipulates that clauses in an agreement are voidable if i) they relate to unreasonably long or undetermined periods of time for exploitation rights in future works, ii) if they are in any other way unreasonable for the author taking into account the contents of the agreement, the relationship between parties and the way the agreement was concluded.

Article 45(d) DCA contains a new right to fair remuneration for movie makers that are deemed to have transferred their rights to the producer of a movie. This Article also provides for additional remuneration for certain makers that play a vital role in several productions such as script writers, directors and leading actors (by means of neighboring rights). The remuneration should be paid to collective rights management organisations but are not owed in case of on-demand exploitations.

Conclusion

The implementation of the Dutch Copyright Contract Act in the Dutch Copyright Act leads to new, interesting legislation for both authors and exploiters of works of art but so far it remains unclear whether it will lead to the strengthening of the position of authors or whether exploiters will actually benefit the most from the new complexities. We will have to wait for the first decisions from the dispute resolution committee or for court decisions to see what the consequences will be in practice. The government has indicated that it will provide an intermediate report to evaluate the operation of the new legislation within two and a half years of its coming into effect (so by 1 January 2018 at the earliest). A full evaluation is not expected until 1 July 2020. In the meantime exploiters should act carefully and be aware of potential additional claims from authors under copyright contracts with a possible link to the Netherlands.